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How to Borrow Against Bitcoin (Bitcoin Loans Tutorial)

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2025-07-18 21:089 min read

Content Introduction
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This video explains how to take a loan against Bitcoin, detailing various platforms available for such transactions. It covers essentials like collateralization, terms you'll need to know, and how overcollateralized loans work. The video discusses centralized and DeFi platforms, including the procedure for borrowing and the concept of loan-to-value ratios. Special attention is given to the risks involved, notably the volatility of Bitcoin and potential liquidation scenarios. It outlines how to navigate this process on platforms such as OKX and Coinbase, and provides insights on interest rates, payment terms, and recommendations for managing collateral. Finally, it highlights the importance of understanding different loan types and encourages viewers to engage with the described platforms.

Key Information

  • The video explains how to take a loan against Bitcoin, including the different platforms available for this purpose.
  • It covers crucial terms like collateral, loan-to-value (LTV) ratios, and the concept of overcollateralized lending, which is necessary when using platforms that are not banks.
  • LTV is important to understand since it determines how much one can borrow against their Bitcoin collateral, usually capped at about 80-85% depending on market conditions.
  • The discussion includes both centralized platforms and DeFi solutions, highlighting the differences in their borrowing processes.
  • The speaker emphasizes the need to manage the collateral effectively to avoid liquidation of assets, particularly when Bitcoin's price is volatile.
  • It also touches on risks associated with centralized platforms, including market and custodial risk, encouraging users to stick with reputable exchanges.
  • Finally, the video illustrates accessing and borrowing using platforms like OKX or Coinbase, detailing how to manage wrapped Bitcoin as collateral.

Timeline Analysis

Content Keywords

Bitcoin loan

This video explains how to take a loan against your Bitcoin, discussing various platforms for borrowing, the importance of collateral, and the concept of overcollateralized lending.

LTV (Loan-to-Value)

The video details the loan-to-value ratio, how it affects borrowing capacity, and the importance of maintaining a healthy LTV to avoid liquidation.

collateral

Collateral is emphasized as essential in the context of cryptocurrency loans, particularly underlining that the value of Bitcoin must be supplied as collateral to secure the loan.

centralized platforms

The video discusses the risks associated with using centralized platforms for loans, including potential issues during market downturns and the custody risks involved.

DeFi platforms

It also touches on decentralized finance (DeFi) platforms, their operation, and how they differ from traditional borrowing methods.

wrapped Bitcoin (CBBTC)

The video explains the concept of wrapped Bitcoin, how it allows for borrowing on different platforms, and how it relates to the Ethereum network.

interest rates

Various interest rate structures are discussed, including flexible and fixed rate loans, and their implications for borrowers in volatile markets.

liquidation

The risks of liquidation in cryptocurrency loans are highlighted, especially in cases of market volatility where collateral value can significantly fluctuate.

Related questions&answers

What is overcollateralized lending?

Overcollateralized lending is a process where you borrow against your Bitcoin by putting up more value in collateral than the amount you are borrowing. For example, if you put $1,000 in Bitcoin, you might only be able to borrow $800.

What platforms can I use to take a loan against my Bitcoin?

You can use centralized platforms, DeFi platforms, or traditional brokerage platforms to take a loan against your Bitcoin.

What are the risks associated with borrowing against Bitcoin?

The risks include liquidation risk (if the value of Bitcoin drops significantly), and centralized platform risk (if the platform becomes insolvent or faces issues).

What does Loan-to-Value (LTV) mean?

LTV is a ratio that compares the amount of a loan to the value of the collateral securing the loan. For instance, if your collateral is worth $1,000 and you borrow $800, your LTV is 80%.

How does the interest rate work on a Bitcoin loan?

Interest rates can vary based on the platform and whether you're taking a fixed or flexible rate loan. Flexible rates can change based on market conditions and demand.

Can I lose my Bitcoin if I do not repay the loan?

Yes, if you do not repay the loan, the platform can liquidate your Bitcoin collateral to recover the amount owed.

What is collateral in the context of a Bitcoin loan?

Collateral is the asset (in this case, Bitcoin) that you pledge to secure the loan. It acts as a guarantee to the lender that you will repay the loan.

What is a wrapped token?

A wrapped token is a version of a cryptocurrency that is issued on a different blockchain and is backed by the original cryptocurrency. For instance, wBTC is Bitcoin wrapped on the Ethereum blockchain.

What happens to my loan if the price of Bitcoin decreases?

If the price of Bitcoin decreases significantly, your loan may approach or exceed the collateral value, leading to a liquidation of your collateral to cover the loan.

How do I ensure I do not face liquidation?

To avoid liquidation, maintain a lower loan-to-value ratio, monitor the price of Bitcoin, and be prepared to add more collateral or repay part of the loan as needed.

Are there any platforms that incentivize new users for Bitcoin loans?

Yes, many centralized exchanges offer bonuses or promotional rates for new users who sign up and take loans on their platforms.

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